CONTENTS
Highlights
Chairman's Statement
Chief Executive's Statement
Financial Review
Board of Directors and Corporate Advisers
Directors' Report
Corporate Governance Report
Corporate Social Responsibility Report
Remuneration Committee Report
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Shareholders' Equity
Notes to the Financial Statements
Notice of Annual General Meeting
Shareholder Information
1
2
4
6
7
9
11
13
14
16
17
18
19
20
21
44
45
HIGHLIGHTS
February 05
March 05
June 05
June 05
September 05
October 05
November 05
December 05
Admission to trading on
Exchange
AIM
, a market operated by
the London Stock
The Group secures ownership of trademark "Druzhba" ("Friendship") in
Ukraine
First AGM of Ukrproduct Group Ltd as a public company
Construction of the new processed cheese production plant in Zhytomyr
completed
Reorganisation of the Marketing department into the Strategic
Development and Marketing department
Raiffeisenbank Ukraine increases the size of the credit line to Ukrproduct
Group to UAH 40 million ( 4.5 million)
First acquisitions: Ukrproduct Group buys Jhmerinka Butter & Cheese
Plant and Letichiv Dairy Plant
"Starokonstantinov Dairy Plant" is granted ISO 9001(cid:1)2000 Quality
Management System Certificate.
CHAIRMAN S STATEMENT
'
2005 WAS A YEAR OF CONTINUED STRONG PERFORMANCE BY THE GROUP AS
WE RETAINED OUR MARKET LEADING POSITIONS, IMPROVED
OPERATIONAL
EFFICIENCIES AND STRENGTHENED THE GROUP'S UNIQUE DISTRIBUTION OFFER.
THE
I am pleased to announce the Group's first annual results as a public company following our
successful admission to AIM in February 2005. The Group has maintained its market leading
positions within its chosen segments of processed cheese and packaged butter at 29% and 21%
respectively. We have continued to improve the Group's overall operational performance through
the continued modernisation of our production facilities. Despite a challenging business environment UPG remains one
of the most profitable and dynamic FMCG businesses in Ukraine.
Results
I am delighted to report a year of continued, strong growth for the company. Sales increased by 47% to 39.9 million
(2004: 27.1 million) with operating profits (EBITDA) increasing by 3 % to 3. million. Profit before taxes grew by
3
3 % to 2.3 million. Profit margins improved at the gross level to 16.9% (2004: 16.3%).
4
5
stake in Letichiv Dairy Plant for a total cash consideration of 1.3 million.
Acquisitions
In November 2005 we completed the acquisitions of 100% of the share capital of Jhmerinka Butter & Cheese Plant Ltd
and a 62%
Group with the necessary increase in production and raw material capacity to meet consumer demand, as well as
expanding the geographic coverage of the Group through the extension of our raw milk supply zone and product
coverage. The Group is in the process of significantly improving the performance of both plants through the
introduction of improved cost controls, leveraging of the distribution network and optimisation of the product mix.
The acquisitions provided the
Dividends
The Group is committed to a progressive dividend policy whilst maintaining a balance between reinvesting profits and
distributing funds to shareholders. As a result, the Board is recommending a final dividend payment of 0.5 pence per
ordinary share for the year ended 31 December 2005 which would lead to 0.85 pence per ordinary share for the full
year. If approved at the AGM, the final dividend will be paid on 30 June 2006 to shareholders on the register as at
2 June 2006.
Strategy
Ukrproduct Group remains committed to its strategy of developing the market(cid:1)leading positions
in its two core segments of processed cheese and packaged butter as well as expanding the
Group's product offering. The fragmented FMCG market in Ukraine also provides the Group with
the opportunity to leverage its current strengths in order to react to opportunities as they arise
and further increas its domestic presence.
e
The Group's manufacturing excellence has provided us with a key advantage in the Ukrainian
FMCG market.
terms of increased quality and efficiency
and developments at Jhmerinka and Letichiv.
continue to improve the operating performance of our plants both in
by the planned redevelopment at Starkon
, as evidenced
We will
The strength of our brands remain the cornerstone of the business. We will continue to invest
in each of our core brands whilst analysing future opportunities across the dairy based product
segment that will drive the overall growth and profitability of the business
s
.
Our distribution network continues to increase in size, furthering the geographic reach of the
roup and the growth in the distribution of non(cid:1)competing third party products. During 2006,
G
Ukrproduct will continue to focus on leveraging the existing strength of the network to ensure
that the Group remains at the forefront of supply chain development in Ukraine.
Succession Planning
Sergey Evlanchik has decided to step down as chief executive in order to dedicate more time to developing other
business interests. He has been instrumental in UPG's success, establishing the Group as one of the market leaders in
the Ukrainian FMCG sector and in leading the company to its admission on AIM in February 2005. He will, however,
remain closely involved in the development of the company; allowing UPG to continue to benefit from his experience in
his new role as an executive director. I am pleased to announce that Iryna Yevets, currently chief operating officer of
UPG, will replace Sergey as CEO. These changes will take effect from June 2006.
1
Iryna Yevets, (38) joined Ukrproduct Group in 2002 as inance irector becoming COO in 2004. Prior to joining UPG,
Iryna founded her own audit company in 1994 before becoming chief accountant in 2001 of Latoritsa, one of Ukraine's
leading integrated food companies. Iryna holds an honours degree in Economics and Engineering from Lviv University
and will shortly complete her MBA.
D
F
Over the last four years she has played a key part in developing the operating efficiencies of the Group, its distribution
network and branded food products. Iryna's in(cid:1)depth knowledge of the company and market will prove invaluable as
UPG furthers its operational development and builds on its market leading positions. The Board and I look forward to
working even more closely with her in the future.
On behalf of the Board, I would like to convey my appreciation to everyone in the Group for their help in ensuring the
continuing success of the business.
Jack Rowell
Chairman
25 April 2006
CHIEF EXECUTIVE'S STATEMENT
IN THE PAST YEAR, UKRPRODUCT GROUP CONTINUED ITS DEVELOPMENT,
MAINTAINED ITS MARKET LEADING POSITIONS AND IMPROVED THE GROUP'S
BRANDS IN TERMS OF INCREASED PRODUCTION QUALITY AND EFFICIENCY.
Introduction
2005 was a dynamic and exciting year for the Group. Not only was it the Company's first year as a
public entity, following its successful admission to AIM, but it was also a year of major changes in
Ukraine initiated by the new government following the "Orange revolution" in late 2004.
It was a year of significant development for Ukrproduct Group with regards to operational performance, development of
new products and expansion of Ukrproduct's geographic coverage. I am pleased to report that the Group was successful
in maintaining its market leading shares in its key business segments of processed cheese and packaged butter.
Sales grew by 47% to 39.9 million (2004: 27.1 million); profit before interest, taxes, depreciation and amortisation
(EBITDA) of 3.5 million was up 34% over the prior year. Profit before tax was 2.3 million, an increase of 33%. Net
profit increased by 39% to reach 2.0 million. Gross profit margin base expanded to 16.9% (2004: 16.3%), EBITDA
margin decreased from 9.6% in 2004 to 8.6% in the year under review,
Net profit margin of 5.0% was broadly in line with the prior year's number of 5.3%. As highlighted in the trading update
provided to the market in December 2005, margins were impacted by high raw material prices and lower prices for
skimmed milk powder in the export market. However, we managed to address this impact through the introduction of
new higher margin products and the renegotiation of raw milk prices as well as through the gradual implementation of
increased pricing across our product range
mainly as a result of increasing indirect costs.
.
On 11 February 2005, Ukrproduct Group took a major step forward in its development plans. Following the
restructuring of the Group UPG was successfully admitted to AIM o the London Stock Exchange. The company raised
6 million gross on admission and the Group's market capitalisation based on the placing price of 53.5p per share was
approximately 22 million.
f
,
,
We were able to efficiently utilise the funds raised on admission to improve the operational performance of the Group
through the strengthening of its sales and distribution network, completion of the new processed cheese workshop at
Molochnik and the continued investment in the development of new products.
Operating review
The construction of the Group's new facility for the production of processed cheese at the "Molochnik" plant in
Zhytomir was completed on schedule during the summer. Construction had commenced in May 2004. This plant, the
biggest of its kind in Ukraine, allowed the Group to almost double the capacity of "Molochnik" to 2,000 tonnes of
processed cheese per month, as well as to develop production space for new processed cheese products
cheese spreads.
such as
In November 2005 the Group completed the acquisition of 100% of the share capital of Jhmerinka Butter & Cheese
Plant and 62% of the share capital of the Letichiv Dairy Plant. The Jhmerinka plant, located in the region of Vinnitza,
Central Ukraine produces a regional range of well established processed cheeses and packaged butters. According to
the official data of the Ukrainian State Committee of Statistics, it was the twelfth largest manufacturer of processed
cheese in Ukraine in 2004. The Letichiv plant, located in Letichiv, Western Ukraine produces various dairy(cid:1)based
products such as cream, butter and casein with the capacity to collect up to 100 tonnes of raw milk per day. The
acquisition of the plant expanded the Group's raw milk zone in the region, which is central for ensuring the continued
supply of raw materials needed for the increase in production at the Starkon plant.
The production and sales of the Group progressed well despite slowing GDP growth and weaker consumer spending.
The production of processed cheese increased by almost 20% to 14,700 tonnes, excluding the effect of acquisitions at
the year end (FY2004: 12,300 tonnes), while the output of packaged butter was maintained at 9,200 tonnes (FY2004:
9,200 tonnes). The production of milk powder also increased during the year totalling over 3,700 tonnes (FY2004:
3,500 tonnes).
Market
The Group's core markets in Ukraine continued to demonstrate growth. The processed cheese market is estimated to
have grown to nearly 50,000 tonnes in 2005, representing an increase of 17% over 2004. UPG's share in the processed
cheese segment in 2005 was approximately 29%. During 2005, the packaged butter market grew by around 6% year
on year with volumes estimated to have reached 42, 00 tonnes by the year end. Ukrproduct's share of the packaged
butter segment was approximately 21%. The skimmed milk powder market decreased slightly compared to 2004
totalling 73
tonnes. The Group's share of this output reached 5.1%.
,000
9
Prospects
Taking into account the dynamic growth trends of our core markets in Ukraine, the Board cons
evaluates potential opportunities that will further the development of the Group.
tantly
reviews and
We continuously aim to improve the operational efficiency of the Group and its high standards of quality. As a result, we are
planning to commence the modernisation of the Starkon plant later this year. The majority of this work will involve the
upgrading of equipment and is expected to be completed by the year end. These developments will increase its operational
efficiency helping to reduce costs as well as further increasing the quality of the products produced such as milk powder.
Alongside the modernisation of Starkon, we plan to install equipment for the production of hard "cheddar" cheese. The
construction of the plant is expected to take 12(cid:1)18 months with the facility becoming fully operational by the third quarter of
2007. The total investment will be funded through a medium to long term credit facility.
The hard cheese sector in Ukraine represents a good opportunity for UPG to enter a growing and profitable market enabling
the Group to increase its product base and sales. The hard cheese sector is estimated to be three times larger than
processed cheese with an average growth rate of 20% per annum (2001(cid:1)2005). There is an opportunity to deliver additional
value through the conversion of the main byproduct of the production process, liquid milk derivatives, into skimmed milk
powder. Since 2004, UPG has gained valuable experience in the sale and promotion of third party hard cheese through its
distribution network. We plan to leverage the inherent strengths of the Company's unique distribution network, production,
branding and quality control to ensure that UPG's domestic entry into this segment is as successful as possible.
s
We will continue to ensure that the purchasing and forward storage of raw materials is as cost effective as possible. The
Group believes that this can be achieved
forward sales contracts and increased performance of the Starkon plant.
leveraging of the Company's purchasing power in the Khmelnitsky region,
via
I would like to take this opportunity to welcome Iryna to the role of chief executive. I believe she is the ideal candidate to
continue to drive the business forward. I look forward to remaining closely involved in the development of the company
through my new role as an executive director.
I would like to express my gratitude to both the Management team and all of the employees of the Group who have been
instrumental in our achievements and developments.
Outlook
Ukrproduct Group has delivered strong growth in sales and profits during 2005 due to our proven strategy set out at the
time of our AIM IPO. UPG will continue to focus on driving the organic growth of the business by leveraging the strengths of
its operating, manufacturing and distribution capabilities to take advantage of the opportunities within the dynamic, Ukrainian
FMCG market. Ukraine's current negotiations with Russia have created some unpredictability within the Ukrainian economy.
Nevertheless, current trading is in line with expectations and we seek further progress in 2006.
Sergey Evlanchik
Chief Executive Officer
25 April 2006
FINANCIAL REVIEW
2005 WAS ANOTHER YEAR OF STRONG GROWTH WHERE WE CONTINUED TO
THE EXCITING OPPORTUNITIES AFFORDED BY THE BUSINESS
BENEFIT FROM
ENVIRONMENT IN UKRAINE. TWO BOLT(cid:1)ON ACQUISITIONS HAVE PROVIDED THE
GROUP WITH FURTHER COMPETITIVE IMPETUS AND WILL HELP TO UNDERPIN
OUR SOLID FINANCIAL PERFORMANCE IN THE FUTURE.
Results
Sales
increase being achieved through organic growth. By segment, processed cheese accounted for
have increased by 47% to 39.9 million (2004: 27.1 million) with the large par
t of this
2
ion and amortisation (EBITDA) of 3.5 million was up 34% over the prior year. Profit before taxes (PBT) was
41% of sales ( 16. million, 2004: 10.0 million), butter for 28% ( 11.4 million, 2004: 9.5 million) and milk powders for
21% ( 8.5 million, 2004: 5.4 million) with the balance made up by
the third(cid:1)party services. Profit before interest, taxes,
depreciat
2.3 million, an increase of 33%. Net profit increased by 39% to reach 2.0 million. Gross profit margin base expanded to
A margin decreased from 9.6% in 2004 to 8.6% in the year under review, mainly as a result
16.9% (2004: 16.3%), EBITD
of costs associated with being a listed company and our investment in Selling & Distribution which underpins our
continued growth. Net profit margin is reported at 5.0%, a slight decrease over the prior year's number of 5.3%.
Acquisitions
In November 2005, the Group acquired 100% of the share capital of Jhmerinka Butter & Cheese Plant Ltd and a 62% stake
The acquisitions were financed through funds raised at
in Letichiv Dairy Plant for a total cash consideration of 1.3 million.
flotation.
in
profits of 0.23 million. The Group intends to invest approximately 40
2006. The performance of the acquired plants has been improved via a combination of key personnel changes, introduction
of improved cost controls, leveraging of the distribution network and optimisation of the product mix.
In the year immediately preceding the acquisition, the plants had aggregated sales of 6 million and operating
capital expenditure for the plants
0K in aggregate
Cash flow
The net cash flow from operating activities during the year was a negative 1.2 million. This reflected a substantial
increase in trade receivables and inventories, the latter predominantly due to our new strategy to forward store semi(cid:1)
processed dairy m
The underlying cash generation of the Group remained strong, with the cash position increasing comfortably at the
year end. The forward storage of raw materials has been completed which will further strengthen the cash flow this
year.
aterials in order to eliminate the uncertainty in supply of the materials to the Group's enlarged plants.
Capital expenditure
Capital expenditure for the year was 3.5 million (2004: 1.6 million) funded by a combination of money raised at
flotation and borrowed
plants, purchase of new equipment, upgrade of the distribution facilities and increase in working capital.
capital. The main areas of investment were the modernisation of the Group's manufacturing
Bank facilities
The Group has a working capital facility
rates in both Hryvna and US Dollar. The facility is renewable in May 2008 and has various clauses protecting the Group
of other unexpected events. Further funding for working
from excessive increases in interest rates and occurrence
capital needs and project finance, if necessary, is available upon request from either the principal bankers or other
banking institutions in Ukraine.
of up to 4.5 million provided by Raiffeisenbank Ukraine at variable interest
Earnings per share
The basic earnings per share (eps) in the year were 5.0 pence (2004: 4.8 pence), up 4%. The basic eps has been
calculated by dividing net profit attributable to ordinary shareholders (profit for the year) by the time(cid:1)weighted average
number of shares in issue throughout the year. The diluted earnings per share were 4.8 pence for the year (2004: 4.8
pence).
Dividends
As a result of the Group's strong performance, the Board is
recommending a final dividend of 0.5 pence per ordinary share for
the year ended 31 December 2005 which would lead to 0.85 pence
per ordinary share for the full year. If approved at the AGM, the final
dividend will be paid on 30 June 2006 to shareholders on the
register as at 2 June 2006.
Dmitry Dragun
Chief Financial Officer
25 April 2006
6
6
BOARD OF DIRECTORS AND CORPORATE ADVISERS
Dr Jack Rowell OBE
Non(cid:1)executive Chairman
Dr Jack Rowell OBE has served as a Board member since November 2004. Dr Rowell
has acted as Chairman of a number of companies in the public and private sectors
and was previously a Director on the Board of Dalgety plc with responsibility for the
Consumer Foods Division. Prior to this Dr Rowell was CEO of Golden Wonder, part of
the Dalgety Group, and finance director and then CEO of Lucas, also part of the
Dalgety Group. In parallel to his business career he has long been involved with
rugby, being England coach between 1994 and 1998.
Sergey Evlanchik
Chief Executive Officer
Sergey Evlanchik is a founder of Ukrproduct Group. He studied at Vladivostok State University of
Economics & Service in the Russian Federation and Oxford University in the UK, where he
received his MBA degree. Together with Alexander Slipchuk, he established the equity trading
company, Alfa(cid:1)Broker in 1994. After the recess of the Russian and Ukrainian equity markets in
1998, Sergey re(cid:1)focused his activities on business development in the industrial sector of
Ukraine, the dairy business in particular, joining the management boards of the companies that
later formed Ukrproduct Group.
Iryna Yevets
Chief Operating Officer
Iryna Yevets is responsible for the Group's overall performance and operational strategy in
Ukraine. Iryna is an experienced accountant who started her own company, Audit Legal Services
in Ukraine in 1994. In 2001 she took up a position as chief accountant at Latoritsa, a leading
integrated food company based in Western Ukraine. She then joined Ukrproduct Group in 2002
as Finance Director, becoming President of the Ukrainian operating company in 2003 and Chief
Operating Officer of the Group in 2004. Iryna holds Honours in Economics & Engineering from
Lviv Engineering University.
From left to right:
Dr Dmitry Dragun
Iryna Yevets
Alexander Slipchuk
Sergey Evlanchik
Dr
Jack Rowell
David Lattimore
Chief Financial Officer
Dr Dmitry Dragun
Chief Financial Officer
Dr Dmitry Dragun is
Bank of Belarus in a variety of senior executive positions before joining the Oxford MBA
Programme in 1997. Post(cid:1)MBA, Dmitry has remained in the UK as the Senior Research
Associate in Finance at Templeton College, Oxford University's designated centre of business
studies and executive development. Dmitry joined Ukrproduct Group in 2003 as financial and
investment adviser, and was later appointed
of the Group. Dmitry holds
the Chartered Financial Analyst (CFA ) certification.
of the Group. Dr Dragun worked at National (Central)
Chief Financial Officer
®
Alexander Slipchuk
Executive Director
Alexander Slipchuk studied at Far(cid:1)Eastern High Engineering Marine School in Russia and
graduated as a maritime navigator in 1989. Together with his partner Sergey Evlanchik,
Alexander established the securities house Alfa(cid:1)Broker in 1994, developed the equity trading
business in the far east of the Russian Federation, and acquired initial stakes in the companies
that later became part of Ukrproduct Group. Later in 1998, Alexander took the executive
positions at the Molochnik and the Starakonstantinovskiy Dairy plants, Ukrproduct's two main
operating assets. He serves as the Group's Executive Director responsible for strategic oversight
of the Group's operations in Ukraine.
David Lattimore
Non(cid:1)executive Director
David Lattimore is a Chartered Director with over thirty years' experience in the dairy industry
with both Unigate plc and Dairy Crest plc. In both companies he held senior and director level
positions within the Groups covering all aspects of their operations. He is currently a director of
Forgefirst Ltd, a management services company with clients ranging from government bodies to
farmers' organisations and public limited companies and he is also a Director and Chairman of
the Finance Committee for South West Food and Drink Ltd.
7
CORPORATE ADVISERS
Registered Office
26 New Street
St Helier
Jersey JE2 3RA
Registered Number
88352
Company secretary
Bedell Secretaries Limited
PO Box 75
26 New Street
St Helier
Jersey JE2 3RA
Nominated adviser and broker
W H Ireland Limited
11 St James's Square
Manchester M2 6WH
Registered accountants and auditors
BDO Stoy Hayward
8 Baker Street
London W1U 3LL
Jersey legal advisers
Bedell Cristin
PO Box 75
26 New Street
St Helier
Jersey JE4 8PP
Principal bankers
Deutsche Bank International Limited
PO Box 727
St. Paul's Gate
New Street
St Helier
Jersey JE4 8ZB
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
8
DIRECTORS' REPORT
The Directors present their report and the audited financial statements of Ukrproduct Group Ltd for the year ended 31 December
2005.
Principal activities and business review
The main activity of the Company (Ukrproduct Group Ltd) is that of a holding company. The main activities of Ukrproduct Group
are the production and distribution of branded dairy foods in Ukraine and the export of skimmed milk powder. The Group is one
of the largest branded dairy(cid:1)based food producers in Ukraine with its own nationwide distribution network. More detailed
commentary on the Group's activities during the year, its financial performance, future plans, and prospects are outlined in the
Chairman's and Chief Executive's Statements and in the Financial Review.
Directors
The names and brief biographical details of the current directors are provided on page 7. Paul Williams resigned as a Director on
20 August 2005. Details of the Directors' remuneration are set out in the Remuneration Committee Report.
Employees
The Group is committed to ensuring provision of equal opportunities for all employees, which is reflected by its selection,
recruitment and training policies. The Group considers its employees to be one of its most valuable assets and rewards high
performance through competitive remuneration and incentive schemes. The Directors also consider it a priority to give
employees the opportunity to communicate their ideas and opinions to all levels of management, both directly and through
various surveys.
Substantial shareholdings
As at
ten largest shareholders are reported):
25
April 2006, the Company has been notified of the following substantial interests in its issued ordinary share capital (the
Shareholder
Crensel Finance Limited
Densim Group Management SA
Fidelity European Smaller Companies Fund
Chase Nominees Limited
The Bank of New York (Nominees)
Bi Emerging Markets L.e.i.f
Fitel Nominees Limited
ING Bank N.V.
HSBC Global Custody Nominee (UK)
Citibank N.A.
Number of ordinary shares
14,237,383
14,237,383
3,300,000
1,612,000
1,322,197
1,050,000
1,000,000
900,000
585,000
550,000
Holding %
34.5%
34.5%
8.0%
3. %9
3. %2
2.5%
2.4%
2.2%
1.4%
1.3%
Payment policy
The Group has a general set of guidelines for paying its suppliers based on specific criteria. However, it is normal practice to
agree payment terms with a specific supplier when entering into a purchase contract. The Group seeks to abide by the payment
terms agreed whenever it is satisfied that the goods or services have been provided in accordance with the agreed terms and
conditions.
Auditors
For the financial year under review, BDO Stoy Hayward LLP served as auditors to the Group. The Board
BDO Stoy Hayward LLP as auditors
the Group for the financial year 2006 at the AGM on 2 June 2006.
to
2
proposes
to reappoint
9
Statement of Directors' Responsibilities
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
financial position of the company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of
fraud and other irregularities and for the preparation of financial statements which comply with the requirements of the
Companies (Jersey) Law 1991.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the company's
financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses
set out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial
statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable International
Financial Reporting Standards.
A fair presentation also requires the
directors to:
select and apply appropriate accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information; and
provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity's financial position and financial
performance.
The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the
entity and to prevent and detect fraud and other irregularities.
Approved by and signed by order of the Board
Authorised Signatory
Bedell Secretaries Limited
Secretary
5
2 April 2006
10
CORPORATE GOVERNANCE REPORT
Introduction
The Group's Board has considered the guidance published by the Institute of Chartered Accountants in England and Wales
concerning the internal control requirements of the Combined Code of Corporate Governance and has established an ongoing
process for identifying, evaluating and managing the significant risks faced by the Group.
In general terms, the Group's corporate governance principles aim to secure adherence to prudent business practice, to prevent
executive excesses harmful to enterprise and to align the managers' interests with those of shareholders. Driving shareholder
value is key and an underlying motive of corporate governance. The Group is well aware of the heightened requirements for
corporate transparency and the shareholder responsibility advocated by the international business community and regulatory
bodies in the UK, Ukraine, Jersey and internationally. Consequently, the Group has evolved its composition along the lines of
clearer responsibility for Directors and a more transparent holding structure for shareholders. As the Group grows, these policies
and procedures will be developed to reflect the requirements of the Combined Code appropriate to a company of the Group's
size.
The Board
The Group Board consists of two on(cid:1)executive and four Executive Directors. The biographical details of the Directors are shown
on page 7. The roles of the Chairman of the Board and the Chief Executive of the Group are held separately with a clear division
of responsibility between them.
N
The Chairman of the Board is an independent on(cid:1)executive Director. All on(cid:1)executive Directors are considered to be
independent, under generally available guidelines, and together bring a wide range of skills and international experience to bear
on issues under consideration.
N
N
Within the scope of the corporate governance procedures, the Board
meets regularly to consider the financial results, budgets, and major
items of capital expenditure of all the Group's companies. This body
is also responsible for formulating, reviewing and approving the
Group's strategy and the phases of its development.
The meetings of the Board of Directors take place in Ukraine or
Jersey, or any other suitable jurisdiction as decided by the Board.
Teleconference calls are also a possibility, when Directors are
present in either (or both) Jersey or Ukraine.
The Board has established two committees: Audit and
Remuneration.
Audit Committee
Chairman, Jack Rowell
The Audit Committee consists of two on(cid:1)executive Directors. All members of the Audit Committee have relevant financial
experience. This Committee, inter alia, is responsible for reviewing the Annual and Interim financial statements, in addition to the
systems of internal control and risk management, and also for ensuring the integrity of the financial information reported to the
shareholders. The Audit Committee is scheduled to meet at least three times per annum.
N
Remuneration Committee
Chairman, David Lattimore
The Remuneration Committee comprises two on(cid:1)executive Directors. This Committee is scheduled to meet at least twice per
annum to advise the Board on the Group's remuneration strategy and to determine the terms of employment and total
remuneration of the Executive Directors, including the granting of share options. Among others, the objective of this Committee
is to attract, retain and motivate Executives capable of delivering the Group's objectives. The Remuneration Committee is also
responsible for the evaluation of the performance of Executive Directors.
N
11
Investor Relations
The Group meets and encourages communication with its institutional and private shareholders, fund managers, financial
s
analysts and brokers. In communicating to the above(cid:1)mentioned parties the Group uses various means such as annual report ,
interim statements, annual general meetings and the Company's corporate website (www.ukrproduct.com) as necessary.
The Group recognises that the increased transparency is an integral part of being a
company. As such the Group has set
up procedures to ensure that it discloses price(cid:1)sensitive information to the market in a timely fashion, regularly consults with its
nominated adviser and ensures timely publication of its interim and annual financial statements within the deadlines imposed by
the AIM Rules and the corresponding requirements of the jurisdictions in which the Group is present or operates.
quoted
Financial procedures and internal control
The Group adheres to comprehensive and strictly regulated budgeting and reporting procedures that are aimed at more efficient
internal control and risk management. The Board is responsible for the Group's system of internal control and for reviewing its
effectiveness, however, it is recognised that any control system can only provide reasonable and not absolute assurance against
material misstatement or loss.
The main constituents of the internal control system are:
documented policies, procedures and authorisation levels;
clearly defined lines of responsibility in the organisational structure of the Group;
a management structure which facilitates ease of communication both vertically and horizontally;
annual budgeting and monthly reporting procedures.
The annual budgets consist of monthly budgets, which are updated each month once actual figures become available. Due to the
dynamic development of the macroeconomic environment of
actual figures for sales, prices and other underlying assumptions from those forecasted may occur. Hence, the budget is flexed
to better reflect the future of the Group. Such variances by each company within the Group are discovered and recommendations
for further actions are formulated.
the Group s main country of operations Ukraine,
variances in
,
'
The internal control system is further enforced by the Group's internal audit department. The main objectives of the internal audit
function are to ensure the safety of the Company's assets and the reliability of accounting records. The internal audit department
is responsible for auditing the financial statements and accounting procedures of the companies within the Group, as well as for
disclosing and reducing various types of risks related to Group operations. Each company within the Group has a designated
auditor, who systematically performs the audits.
12
CORPORATE SOCIAL RESPONSIBILITY REPORT
The Group is committed to the principles of corporate social responsibility ( CSR ) and believes that these are in the long(cid:1)term
interests of its shareholders. Accordingly, the Board is committed to developing and implementing CSR policies which are aimed
at
:
promoting equality and fairness among employees, partners and suppliers;
ensuring safe and healthy working conditions;
maintaining the Group's corporate reputation and dedication to business ethics;
supporting the communities in which the Group operates; and
establishing long(cid:1)term and healthy relationships with the Group's partners, customers and other affiliated parties.
"
"
The main elements of the Group's approach towards fulfilling the objectives outlined above comprise the following:
Employees
The Group is committed to ensuring equal opportunities to all its employees, both current and prospective. Each employee's
efforts are highly valued and the Board believes that a diverse mix of the workforce facilitates innovation, efficiency and
teamwork. As a matter of corporate policy, regular training and development workshops are conducted for the staff. These are
aimed at all employee groups, including management, technical as well as production personnel. The training programmes
encourage the staff to move up the career ladder and are central to the Group's continuing growth and success.
Health and safety
Management at business units within the Group are responsible for developing and maintaining the underlying practices that
provide for a healthy and safe working environment. Special attention is given to the production facilities, where the equipment,
lighting, air conditioning, workspace and other constituents undergo constant review and optimisation. Regular monitoring is
carried out to ensure that required standards are met and that employees use the provided communication channels to further
develop their surrounding working conditions.
Customers
Customer satisfaction is at the core of the Group's business model. Accordingly, the
Board is keen to continue supplying the customers with high quality, affordable products
as required by current market demands. The Group's segmentation practices are aimed
at segregating various customer groups in order to meet their needs with maximum
efficiency. In addition, regular marketing surveys are conducted to ensure maximum
value is offered to customers on a consistent basis.
Environment and community
Even though the dairy(cid:1)based food manufacturing industry generally has a low
environmental impact, the Group recognises the importance of good environmental
practices and seeks to minimise a negative impact that its operations or products may
have on the surrounding areas. The Group complies with the environmental laws and
regulations in Ukraine and strives to promote effective resource management, energy
conservation and waste efficiency.
The Group is also anxious to develop and maintain partnership relationships with the
communities it operates in, by means of supporting local initiatives and charitable
events. The Group participates in such initiatives by contributing cash donations and
gifts, as well as employee time, by encouraging staff to participate as volunteers.
13
REMUNERATION COMMITTEE REPORT
This report is prepared by the Remuneration Committee of the Board and sets out the Company's policy on the remuneration of
the Directors, with a description of service agreements and remuneration packages for each Director.
"
"
The Remuneration Committee (the Committee )
The Committee comprises two Non(cid:1)executive Directors and is chaired by David Lattimore. This Committee is scheduled to meet
at least twice per annum. The objective of the Committee is to advise the Board on the Group's overall remuneration policy and
to determine the terms of employment and total remuneration of the Executive Directors and certain senior employees, including
the granting of share options. The Remuneration Committee is also responsible for the evaluation of the performance of
Executive Directors.
Remuneration Policy
The Company's remuneration policy is to provide remuneration packages which:
are designed to attract, motivate and retain high calibre Executives;
are competitive and in line with comparable businesses;
intend to align the interests of the Executives with those of the shareholders by means of fixed and performance related
remuneration; and
set challenging performance targets and motivate Executives to achieve those targets both in the short and long(cid:1)term.
Base salary
The Committee reviews base salaries of the Executive Directors each year taking into account job responsibilities, competitive
market rates and the performance of the Executive concerned. Consideration is also given to the cost of living and the Director's
professional experience. While determining the base salaries, the Committee also considers general aspects of the employment
terms and conditions of employees elsewhere in the Group.
Incentive bonus plans and equity arrangements
The Committee plans to consider developing long(cid:1)term equity incentive arrangements to make the overall Executive
Remuneration structure more performance(cid:1)related, more competitive and aligned with shareholders' interests.
Service contracts
The appointments of executive Directors are valid for an indefinite period and may be terminated with three months notice given
by either party at any time. The Company's provision for compensation for loss of office is to provide compensation which
reflects the Company's contractual obligations.
Bonus Scheme
The Committee has established a cash bonus scheme for Executive Directors based on the overall performance of the Company
and attainment of the operating profit targets.
Non(cid:1)executive directors
The appointments of non(cid:1)executive Directors are valid for an indefinite period and may be terminated with three months notice
given by either party at any time. The decision to re(cid:1)appoint, as well as the determination of the fees of the non(cid:1)executive
Directors, rests with the Board. The non(cid:1)executive Directors may accept appointments with other companies, although any such
appointment is subject to the Board's approval and terms and conditions of Service Agreements.
14
Directors' remuneration
Details of the Directors' cash remuneration are outlined below:
Annual Salary/fee
Salary/fees
Bonus
Benefits in kind
Total remuneration
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
Executive
Sergey Evlanchik
Iryna Yevets
Alexander Slipchuk
Dr Dmitry Dragun
Non(cid:1)executive
Dr Jack Rowell
Paul Williams
David Lattimore
50,000
40,000
45,000
35,000
60,000
50,000
45,000
40,000
30,000
25,000
25,000
30,000
25,000
25,000
8,333
6,667
7,500
5,833
5,000
4,167
4,167
56,667
46,667
45,000
38,333
30,000
15,942
25,000
30,000
8,333
6,667
7,500
5,833
5,000
4,167
4,167
56,667
46,667
45,000
68,333
30,000
15,942
25,000
Share based payments
The Company has granted share based payments (share options) to the Directors during the year and details are shown below.
The Directors' emuneration disclosed above does not include any amounts for the value of options to acquire shares of the
Company
r
.
Directors
Iryna Yevets
Dr Dmitry Dragun
Dr Jack Rowell
David Lattimore
Share Options
Exercise Price, pence
Exercise Period
434,299
217,149
130,290
130,290
53.5
53.5
53.5
53.5
to 11/02/2009
to 11/02/2009
to 11/02/2009
to 11/02/2009
15
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF UKRPRODUCT
GROUP LTD
'
We have audited the group financial statements (the financial statements ) of Ukrproduct Group Ltd for the year ended
December 31, 2005 which comprise the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cash
Flow Statement, the Consolidated Statement of Change in Shareholders' Equity and the related notes. These financial statements
have been prepared under the accounting policies set out therein.
"
"
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing.
We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in
accordance with the Companies (Jersey) Law 1991. We also report to you if, in our opinion, the Directors' Report is not
consistent with those financial statements, if the company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial
statements. The other information comprises only the Directors' Report, the Chairman's Statement, the Operating and Financial
Review and the Corporate Governance Statement. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other
information.
Our report has been prepared pursuant to the requirements
entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of
our engagement letter or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such
liability.
our engagement letter and for no other purpose. No person is
of
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing issued by the International Auditing and
Assurance Standards Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures
in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in
the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the
state of the group's affairs as at December 31, 2005 and of its profit for the year then ended; and
the financial statements have been properly prepared in accordance with the Companies (Jersey) Law 1991.
BDO Stoy Hayward LLP
Chartered Accountants and Registered Auditors
8 Baker Street, London
8 April 2006
2
16
CONSOLIDATED BALANCE SHEET
Non(cid:1)current assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Other debtors
Cash and cash equivalents
Total assets
Equity Aapital and reserves attributable to equity holders
Share capital
Other reserves
Retained earnings
Minority interest
Total equity
Liabilities
Non(cid:1)Current Liabilities
Long term loans
Other long term liabilities
Deferred tax liabilities
Current Liabilities
Bank loans and overdrafts
Trade and other payables
Current portion of long term liabilities
Current income tax liabilities
Total equity and liabilities
Notes
As at
31 December
2005
000`
As at 31
December
2004 (re(cid:1)stated)
000`
6
7
8
9
11
12
13
14
15
16
27
17
18
9
19
20
18
9,034
1 551,
97
90
10,772
4,523
4,068
358
453
9,402
20,174
4,121
5,192
3,815
13,128
186
13,314
152
837
989
3,042
2,606
67
156
,
5 871
20,174
5,023
3
83
36
5,145
2,328
2,023
218
300
4,869
10,014
3,000
607
1,412
5,019
132
5,151
221
938
703
1,862
1,077
1,671
253
3,001
10,014
s
These financial statements were approved and authori ed for issue by the Board of Directors on April 25, 2006.
The notes on pages 21 to 43 form part of these financial statements.
17
CONSOLIDATED INCOME STATEMENT
Revenues
Costs of sales
Gross profit
Other operating income
General and administrative expenses
Selling and distribution expenses
Other operating expenses
Interest income
Interest expense
Profit before taxation
Income tax expense
Profit after taxation
Attributable to:
Equity holders
Minority interest
Earnings per share basic, pence
Earnings per share diluted, pence
The notes on pages 21 to 43 form part of these financial statements.
Year ended
31 December
2005
`
000
39,962
(33,194)
6,768
594
(2,167)
(2,084)
(563)
41
(244)
2,345
(337)
2,008
2,003
5
5.0
4.8
Year ended
31 December
2004 (re(cid:1)stated)
000`
27,115
(22,698)
4,417
63
(1,045)
(1,070)
(296)
(312)
1,757
(301)
1,456
1,436
20
4.8
4.8
Notes
5
21
21
21
21
23
27
24
24
18
CONSOLIDATED CASH FLOW STATEMENT
Cash flows from operating activities
Net profit before taxation
Adjustments for:
Exchange difference
Depreciation
Interest expense
Interest income
Share based payments
(Increase) in inventories
(Increase) in trade and other receivables
(Decrease)in trade and other payables
Cash (used by)/ generated from operations
Interest paid
Interest received
Income tax paid/ (refunded)
Net cash (used in)/ generated by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of investments (net of cash acquired)
Proceeds from sale of property, plant and
Proceeds from sale of investments
Loans repaid/ (issued)
Net cash used in investing activities
Cash flows from financing activities
Net proceeds/ (repayments) from long term borrowing
Proceeds/ (repayments) from issue of bonds
Proceeds from issue of shares
Cash paid on liquidation of Ukrproduct Group plc
Fund(cid:1)raising expenses
Dividends paid
Net proceeds from issue of promissory notes
Net proceeds from issue of promissory notes
Net cash generated by/ (used in) financing activities
Effect of exchange rate changes and restatements on
cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Notes
6, 7, 21
23, 24
10
3(c)
26
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
14
14
The notes on pages 21 to 43 form part of these financial statements.
Year ended
31 December
2005
000`
Year ended
31 December
2004
000`
2,345
(594)
892
244
(41)
76
2,922
(1,507)
(1,026)
(990)
(601)
(244)
41
(384)
(1,188)
(3,480)
(1,282)
197
(4,565)
(99)
(964)
5,519
)12
(
(361)
(148)
1,656
5,591
315
153
300
453
1,757
524
312
2,593
(872)
(71)
(349)
1,301
(312)
(66)
923
(1,566)
1
3
(7)
(207)
(1,776)
232
680
(20)
147
1,039
(18)
168
132
300
19
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders
Balance at 1 January 2004
Gain on revaluation of fixed assets
Deferred income tax on gain on revaluation
Issue of shares
Issued on acquisition of Operating Group
Merger reserve arising on acquisition of Operating Group
Net profit for the period
Depreciation on revaluation of fixed assets
Elimination of share issued and
Merger reserve on acquisition of Operating Group
Exchange differences on translation to
the presentation currency
Balance at 31 December 2004
Issue of shares
Fund(cid:1)raising expenses
Share based payments
Exclusion from Group
Acquisitions
Net profit for the period
Dividends paid
Depreciation on revaluation of fixed assets
Reduction of revaluation reserve
Decrease of minority nterest
Exchange differences on translation to
the presentation currency
i
Notes
15
25
10
26
Share
capital
000
`
3,000
15
15,273
Other
reserve
000
`
(1,414)
3,073
(674)
(15,288)
(154)
(15,288)
15,288
3,000
1,121
(224)
607
4,398
(361)
76
(12)
(108)
(25)
(28)
589
Retained
earnings
000
`
(44)
Minority
interest
000
`
68
75
(16)
1,436
158
(138)
1,412
2,003
(148)
108
25
15
400
20
(4)
(11)
132
62
5
(43)
30
186
Total
equity
`000
1,610
3,148
(690)
15
15,273
(15,288)
1,456
(373)
5,151
5,519
(361)
76
(12)
62
2,008
(148)
1,019
13,314
Balance at 31 December 2005
4,121
5,192
3,815
The notes on pages 21 to 43 form part of these financial statements.
20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Group and Principal Activities
The Company is a public limited liability ompany registered in Jersey with
Jersey, JE2 3RA, Channel Islands.
c
its
registered office at 26 New Street, St Helier,
c
For the purposes of this financial information the terms Operating Group and "Group" have been taken to indicate the companies
listed in Note 3( ). The Operating Group includes all those subsidiaries of Ukrproduct Group Ltd (the Company ) that operate
on the territory of Ukraine. The Group includes the Company and all of its subsidiaries. Ukrproduct Group Ltd became a public
company on 11 February 2005, placing 27.2% of its share capital on the Alternative Investment Market of the London Stock
Exchange.
"
"
"
"
"
"
"
"
The Group's main activity is production and distribution of dairy(cid:1)based food products (butter, processed cheese, milk powders)
in Ukraine and abroad. The Group's sales in Ukraine are managed and facilitated by its own pan(cid:1)Ukrainian distribution network,
with a trading company Agrospetsresursy, and a logistics subsidiary Ukrproduct(cid:1)Logistics. The distribution and logistics network
currently employs almost 450 employees and makes use of around 140 vehicles and refrigerated vans.
The Group's exports are managed by the Company's two subsidiaries: Ukrprodexpo and Dairy Trading Corporation. Capitalising
on the Group's strong reputation for quality and business excellence, th
companies collaborate with the international traders
s
and partners and export the product , mainly skimmed milk powder, to Germany, Russia, Denmark, Holland, Bulgaria and other
countries.
ese
The Group's overall management and production facilities are based in Ukraine, with the HQ in Kyiv. The Group commands
leading positions in the Ukrainian processed cheese and packaged butter markets and owns a range of widely recognisable
trademarks in Ukraine, including Nash Molochnik , Narodniy Product , Vershkova Dolina . The average number of employees
of the Group during the year ended 31 December 2005 was 1,805 (2004 1,194).
" "
" "
"
"
2. Operating Environment of the Group
The main activities of the Operating Group are concentrated in Ukraine, a country which continues to display characteristics of an
emerging market.
The prospects for future economic stability in Ukraine are largely dependent upon the effectiveness of the economic measures
and reforms undertaken by the government, together with legal, regulatory and political developments, which are beyond the
control of the Group.
3. Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial information are set out below:
a) Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
("IFRS"), including International Accounting Standards ("IAS") and Interpretations issued by the International Accounting
Standards Board.
The majority of companies making up the Operating Group maintain their accounting records in accordance with Ukrainian
regulations. The financial information has been prepared from those accounting records and adjusted as we consider necessary
in order to comply with IFRS. Accounting records of the Operating Group are maintained in Ukrainian Hryvnas ("UAH"). The
Hryvna has also been adopted as the functional currency for the purpose of the consolidated financial statements (see note 3 ).
d
The financial information has been
the Group's presentational currency.
translated into British pounds sterling (hereinafter GBP or
) at the rates given in note 3( ), as
r
The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of
property, plant and equipment at fair value in the years ended 31 December 2004 and 2005.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Group's accounting policies.
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
b
) Changes in accounting policies
In preparing these financial statements, the following standards have been applied by the Group for the first time:
IFRS 2 "Share(cid:1)based payment" has been applied to employee options granted after 7 November 2002 that had not vested by
1 January 2005. There was no effect on the adoption of the IFRS 2 on the comparative figures as the Group had no share based
payments (options) in issue
December 2005, the share options reserve amounted to 196,000. The share(cid:1)based payment expense has been included in the
following line of the income statement: administrative expenses 76,000 (2004 (cid:1) nil)
.
. For 2005, the impact of share(cid:1)based payment is a net charge to income of 76,000. At 31
"
3
n
IFRS "Business Combinations has bee applied to the accounting for business combinations for which the agreement date
is on or after 31 March 2004. This IFRS has also been applied to the accounting for goodwill arising from a business
combination for which the agreement date is on or after 31 March 2004, or any excess of the acquirer's interest in the fair value
of the acquiree's identifiable assets, liabilities and contingent liabilities over the cost of a business combination for which the
agreement date is on or after 31 March 2004. There was no effect of the adoption of IFRS 3 on the Group's comparative
numbers and financial statements as there was no goodwill as at 31 December 2004. The effect of the implementation of IFRS 3
resulted in the recognition of goodwill arising from business combinations during 2005 is detailed in Note 7 (Intangible assets)
and Note 10 (Acquisition of subsidiaries).
c
) Principles of combination and consolidation
The consolidated financial statements include the results of the companies set out in the table below. As described in note 1, the
Group is comprised of a number of companies which were brought together under a single parent company (cid:1) Ukrproduct Group
Ltd (cid:1) on 11 February 2005.
The companies which became subsidiaries of Ukrproduct Group Ltd on 11 February 2005 were Ukrproduct Group CJSC, Dairy
Trading Corporation Ltd and Linkstar Ltd. All three companies were ultimately 100% owned equally by Crensel Finance Ltd and
Densim Group Management SA, companies which had incorporated Ukrproduct Group Ltd and were its 100% owners. On 11
February 2005 Crensel Finance Ltd and Densim Group Management SA made a share exchange with Ukrproduct Group Ltd,
granting to the lat er all their interests in Ukrproduct Group CJSC, Dairy Trading Corporation Ltd and Linkstar Ltd in exchange for
the newly issued shares by Ukrproduct Group Ltd. As a result of these share exchange transactions Ukrproduct Group Ltd came
into full possession of Ukrproduct Group CJSC, Dairy Trading Corporation Ltd and Linkstar Ltd, while Crensel Finance Ltd and
Densim Group Management SA retained full possession of the enlarged share capital (30 mln shares) of Ukrproduct Group Ltd.
As the transactions in which Ukrproduct Group Ltd took control of the other Group companies may be defined as transactions
under common control, these transactions fall outside the scope of IFRS.
t
o
IFRS contain specific guidance to be followed where a transaction falls outside the scope of IFRS. This Guidance is included
paragraphs 10 to 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that
where IFRS do n t include guidance for a particular issue, the directors may also consider the most recent pronouncements of
other standard setting bodies that use a similar conceptual framework to develop accounting standards. In this regard, it is noted
that the United States Financial Accounting standards Board (FASB) has issued an accounting standard covering business
combinations (FAS141) that is similar in a number of respects to IFRS3. Further there is currently a major project being run
jointly by the IASB and FASB to converge IFRS and US GAAP.
in
In contrast to IFRS3, FAS141 does include, as an Appendix, limited accounting guidance for transactions under common control
which, as with IFRS3, are outside the scope of that accounting standard. The guidance contained in FAS141 indicates that a form
of accounting that s similar to pooling of interests accounting, which was previously set out in APB Opinion 16, may be used
when accounting for transactions under common control.
i
Having considered the requirements of IAS8, and the guidance included within FAS141, it is considered appropriate to use a
form of accounting which is similar to pooling of interests when dealing with the transaction in which Ukrproduct Group Ltd
acquired its controlling interests in Ukrproduct Group CJSC, LinkStar Limited, and Dairy Trading Corporation Limited.
s
mean that those results are on substantially the same basis as the results of operations for the period after the acquisition
In consequence, the results of operation for the period should be reported as though the acquisition of the controlling interest
through transaction under common control occurred at the beginning of the period. The effects of intercompany transactions
should be eliminated in determining the results of operation for the period prior to the acquisition of the controlling interest
This
of the controlling interest. Similarly, the consolidated balance sheets and other financial information should be presented as
though the assets and liabilities of the combining entities had been transferred at the beginning of the period, i.e. 1 January
2005. Financial statements and other financial information presented for prior years should also be restated to furnish
comparative information. All restated financial statements and summaries should indicate clearly that financial data of previously
separate entities is combined
.
22
The results and balances of the following companies have been consolidated:
r
r
Molochnik OJSC
Ukrprodexpo SC
Starokonstantinovskiy Molochniy Zavod SC
Agrospetsresursy LLC
To goviy Dom Maslyana SC *
To goviy Dom Milko SC *
Agrospetsresursy Dnipro SC*
Agrospetsresursy Lviv SC*
Starkon(cid:1)Moloko LLC
Intermilk SC
Ukrevroprodukt SC*
Agrospetsresursy (cid:1) Kharkov SC*
Nash Molochnik Private Enterprise SC*
Ukrproduct(cid:1)Logistics Private Enterprise
Ukrproduct Group CJSC
Krasilovsky Molochny Zavod Private Enterprise SC
Jmerinsky Maslosyrzavod LLC
Letichevsky Maslozavod OJSC
Agrospetsresursy Zhytomyr SC*
Dairy Trading Corporation
Alfa(cid:1)Broker Ltd
Ukrproduct Group plc
Link tar Limited
Dairy Trading Corporation
Ukrproduct Group Limited
s
Country of
incorporation
Group
holding
Method of
2005
2004
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
USA
U
U
Cyprus
BVI
Jersey
97.4%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
62.2%
100%
100%
100%
100%
100%
100%
100%
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Merger method
Acquisition method
Acquisition method
Acquisition method
n/a
N/a
n/a
n/a
Acquisition method
Merger method
Parent
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Acquisition method
Merger method
n/a
n/a
n/a
Acquisition method
Merger method
Merger method
Acquisition method
Merger method
Merger method
Parent
* Subsidiaries of Agrospetsresursy LLC, the Operating Group's specialised distribution companies (also refer to note 6 for additional
Agrospetsresursy subsidiaries recorded at cost).
Between 30 June 2004 and 31 January 2005 Alfa(cid:1)Broker Ltd transferred its principal business and assets to Link tar Limited, a
subsidiary of the Company registered in Cyprus. As at January 1, 2005, Dairy Trading Corporation (USA) had transferred its net
assets to Dairy Trading Corporation (BVI).
s
Intermilk SC is in the process of solvent liquidation. Alfa(cid:1)Broker Ltd, Dairy Trading Corporation (USA), and Ukrproduct Group plc
(UK) have been liquidated.
During 2005, Ukrproduct Group CJSC (the Ukrainian holding company of the Operating Group) has established Krasilovsky
Molochny Zavod Private Enterprise SC and also acquired companies Jmerinsky Maslosyrzavod LLC and Letichevsky Maslozavod
OJSC. The effect of the acquired companies to the net assets of the Group is disclosed in Note 10.
d) Translation from functional to presentation currency
Management has considered what would be the most appropriate functional and presentational currencies for these financial
statements. As a result of this review management has concluded that:
the Ukrainian Hryvna is the currency of the primary economic environment in which the Group operates. Consequently the
(i)
Ukrainian Hryvna is the most appropriate functional currency for the Group;
(ii) the Group should use British pounds sterling as the presentational currency for its Consolidated IFRS financial statements.
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Consequently, management has used the following basis for the translation of Ukrainian Hryvna figures to British pounds for
presentation purposes:
for current year figures all assets and liabilities are translated at the rate effective at the balance sheet date. Income and
(i)
expense items are translated at average rate for the year. Equity items other than the net profit or loss for the period that is
included in the balance of accumulated profit or loss are translated at the rate effective at the balance sheet date.
(ii) for comparative figures all assets and liabilities are translated at the closing rate existing at the relevant balance sheet date.
Income and expense items are translated at an average rate for the period. Equity items other than the net profit or loss for the
period that is included in the balance of accumulated profit or loss are translated at the closing rate existing at the previous
balance sheet date.
(iii) all exchange differences resulting from the application of the translation methods described above are recognised directly in
equity.
Actual exchange rates applied in the translation are detailed in Note 3( ) below.
r
) Segment reporting
e
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different from those of other business segments. A geographical segment is engaged in providing products or
services within a particular economic environment that are subject to risks and returns that are different from those of segments
operating in other economic environments.
The Group has recogni ed business segments as primary format of segment reporting. The secondary format was chosen to be
the geographical segment.
s
) Property, plant and equipment
f
Figures calculated using Ukrainian statutory accounting rules, have been adopted as deemed depreciated historical cost for
property, plant and equipment as at 1 January 2004. Subsequent additions have been recorded at cost.
With effect from 1 January 2004, the Group adopted the revaluation model (as defined in IAS 16: Property, Plant and Equipment)
for all classes of assets. The Group's assets were revalued in January 2004. This change of accounting policy was made on the
grounds that management believe that this policy provides more reliable and relevant financial information because it better
reflects the value in use of such assets to the Group. In accordance with the provisions of that standard, the revaluation model
has not been applied retrospectively.
All categories of property, plant and equipment are subsequently carried at fair value, based on periodic (usually triennial)
valuations by a professionally qualified valuer. Changes in fair value are recognised in equity (the "revaluation reserve"). An
appropriate transfer is made from the revaluation reserve to the profit and loss reserve when freehold land and buildings are
expensed through the income statement (eg through depreciation, impairment or sale).
Depreciation is applied to all items of property, plant and equipment with the exception of land. Depreciation is calculated using
the straight(cid:1)line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as
follows:
Buildings
Plant and machinery
Equipment and motor vehicles
20(cid:1)40 years;
7(cid:1)15 years;
3(cid:1)10 years.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in operating
profit.
g) Assets under construction
Assets under construction are reported at their cost of construction including costs charged by third parties and the
capitalisation of the Group's material costs incurred. No depreciation is charged on assets during construction. Upon completion,
all accumulated costs of the asset are transferred to the relevant fixed asset category and depreciated at applicable rates from the
time the asset is completed and ready for use.
24
) Intangible assets
h
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specialised
software. These costs are amortised over their estimated useful lives (3 years). The amorti ation expense is included within
administrative expenses in the Income Statement.
s
Trademarks are shown at historical cost. Trademarks have finite useful lives and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight(cid:1)line method to allocate the cost of trademarks over their estimated
useful lives (20 years).
) Goodwill
i
Goodwill is excess of acquisition costs above the fair value of the Group's share in the net assets of a subsidiary or an associated
company at the acquisition date. Goodwill is reported in intangible assets with any impairment being charged to the Income
Statement within administrative expenses. Goodwill is annually assessed with respect to the impairment of value and reported at
cost net of total loss from impairment of value. Gains or losses on disposal of a subsidiary includes in the book value of goodwill
related to the subsidiary sold.
s
) Impairment of assets
j
Assets with indefinite useful life are not amorti ed and are annually assessed with respect to the impairment of their value.
Assets subject to amortization are assessed with respect to the impairment of their value whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recovered. Whenever the carrying amount of an asset
exceeds its recoverable value, an impairment loss is recognised in income. At that the recoverable amount is the higher of an
asset's net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's
length transaction while value in use is the present discounted value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal after the end of its useful life. Recoverable amounts are estimated for individual
assets or, if it is not possible, for the cash generating unit.
Impairment charges are included in the administrative expenses line item in the Income Statement, except to the extent they
reverse gains previously recognised in the statement of recognised income and expense.
) Investments
k
The Group has investments in the equity of Ukrainian companies including investments representing more than 50% of the share
capital of the investee company. Other than as referred to in section ( ) above, where such companies are not expected to
become subsidiaries of the Company, they have been excluded from the consolidation and are treated as investments.
c
Investments are carried at cost, which management believe is not significantly different from their fair value.
) Inventories
l
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first(cid:1)in, first(cid:1)out method. The
cost of finished and unfinished goods comprises raw materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity) but excludes borrowing costs.
) Trade receivables
m
Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for
impairment of trade receivables is established when there is objective evidence that the Operating Group will not be able to
collect all amounts due according to the original terms of receivables.
) Cash and cash equivalents
n
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short(cid:1)term highly liquid
investments with original maturities of three months or less. Bank overdrafts are included within borrowings in current liabilities
on the balance sheet.
o) Share(cid:1)based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income
statement over the vesting period.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the income statement over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of
goods and services received.
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
p
) Revenue recognition
Revenue comprises the invoiced value of sales of goods and services net of value added tax, rebates and discounts after
eliminating sales within the Group. Revenue from the sale of goods is recognised when the significant risks and rewards of
ownership of the goods are transferred to the buyer. Revenues and expenses are recognised on an accruals basis.
q) Income taxes
Taxation has been provided for in the financial statements in accordance with relevant legislation currently in force. The charge
for taxation in the Income Statement for the year comprises current tax and changes in deferred tax. Current tax is calculated on
the basis of the taxable profit for the year, using the tax rates in force at the balance sheet date. Taxes, other than on income, are
recorded within operating expenses.
Deferred income tax is provided, using the balance sheet liability method, for all temporary differences arising between the tax
basis of assets and liabilities and their carrying values for financial reporting purposes except for those difference permanently
disallowed. A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at tax rates that are
expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or
substantively enacted at the balance sheet date.
s
r
) Foreign currency translation
Transactions denominated in currencies other than the Hryvna ("foreign currencies") are recorded in Hryvna at the exchange rate
effective on the transaction date. Exchange differences resulting from the settlement of transactions denominated in foreign
currency are included in the income statement using the effective exchange rate on that date.
Monetary assets and liabilities denominated in foreign currency are translated into Hryvna at the official exchange rate at the
balance sheet date. Foreign currency gains and losses arising from the translation of assets and liabilities are reflected in the
Income Statement as foreign exchange translation gains and losses.
Income and expense figures have been converted to British pounds for presentation purposes at average rate for the year.
Assets, liabilities and equity items have been converted to British Pounds (
resulting exchange differences were recognised as a separate component of equity.
for presentation purposes at a closing rate. The
)
For translation of the financial data, the exchange rates of Ukrainian Hryvna to GBP and USD officially set by the National Bank of
Ukraine were used. The weighted average rate for the year was calculated based on the daily exchange rates officially set by the
Bank of Ukraine.
Official rate as at December 31, 2005
Official rate as at December 31, 2004
Weighted average rate for 2005
Weighted average rate for 2004
Hryvna for
1 GBP ( )
8.6759
10.1827
9.3129
9.7391
Hryvna for
1 USD ( )
5.0500
5.3054
5.1213
5.3192
) Pension costs
s
The Group contributes to the Ukrainian state pension scheme, social insurance and employment funds in respect of its
employees. The Group's pension scheme contributions are expensed as incurred and are included in staff costs. The Group
doesn't operate any other pension schemes.
t
) Financial instruments
The carrying amounts of the Group's financial assets and liabilities (comprising investments, bank and cash balances, trade and
other debtors, trade and other creditors and short and long(cid:1)term borrowings) approximate to their fair values at the date of the
transaction. Where the fair value of a financial asset is materially below the carrying amount, the carrying amount is written down
to fair value.
u
) Dividends
Equity dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this
is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM.
26
v
) Share issue costs
All qualifying transaction costs in respect of the issue of shares are accounted for as a deduction from equity, net of any related
tax deduction. Qualifying transaction costs include:
Costs of preparing the prospectus
Accounting, tax and legal expenses
Underwriting fees
Valuation fees in respect of the shares and of other assets
) Borrowing costs
w
Borrowing costs are recognised as an expense in the period in which they are incurred.
4. Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, and price risk), credit
risk, liquidity risk and cash flow interest(cid:1)rate risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the Group Treasurer under policies approved by the Board of Directors. The Group Treasurer
identifies and evaluates financial risks in close co(cid:1)operation with the Group's operating units. The management board provides
broad guidance and operating principles for overall risk management, as well as written policies covering specific areas, such as
foreign exchange risk, interest(cid:1)rate risk, credit risk, and investing excess liquidity.
Market risk
Foreign exchange risk
Although the Group is an international operator, the management believe that the foreign exchange risk is minimal at present and
is likely to remain so in the future. The Group's international operations consist primarily of the export of milk powders to the
various markets around the world. The primary currency for export sales is the US dollar.
The Group's established corporate policy towards minimising the potential foreign exchange risk is to require the customers to
pay for the export shipments of the skimmed milk powder in full and in advance (from one to two months). The Group's export
operations have never employed any other payment methods as a matter of corporate principle, and this is expected to continue
in the future. Similarly, the Group has never been engaged in forward transactions and does not expect to conduct these
transactions in the future. The Directors believe that these policies effectively eliminate the foreign exchange risk. The Group's
export(cid:1)related obligations in Ukraine, such as payments for raw milk and packaging materials, are all entirely Hryvna(cid:1)
denominated. The UAH/US dollar exchange rate has been reasonably stable in recent years; the directors have no reason to
believe that this is likely to change in the future.
Price risk
The Group is exposed to commodity price risk for its milk powders business segment. The price for this product is
predominately determined by the world market and the activities of large international trading companies in this market. There is
always a risk that the prevailing world marketing price may be insufficient to cover the production costs for skimmed milk
powder. Against such a risk, the Group recognises that there is no effective financial hedge, thus the major instrument employed
in management of the price risk is the tight control of the operating costs.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales of products both
in Ukraine and abroad are made to customers with an appropriate credit history.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount
of committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group's Treasurer aims to maintain
flexibility in funding by keeping committed credit lines available.
Cash flow and fair value interest(cid:1)rate risk
As the Group has no significant interest(cid:1)bearing assets, the Group's income and operating cash flows are substantially
independent of changes in market interest rates.
The Group's interest(cid:1)rate risk arises from medium to long(cid:1)term borrowings. Potentially, borrowings issued at variable rates
expose the Group to cash flow interest(cid:1)rate risk. Borrowings issued at fixed rates expose the Group to fair value interest(cid:1)rate risk.
Operating Group policy is to maintain at least 80% of its borrowings in fixed rate instruments.
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
5. Segment information
At 31 December 2005, the Group was organised on a worldwide basis into three main business segments:
(1) Cheese
(2) Butter
(3) Milk powders
The segment results for the year ended 31 December 2005 are as follows:
Cheese
000`
Butter
`
000
Milk
powders
`
000
Total
Dairy
`000
Sales to external customer
16,251
11,374
8,515
36,140
Gross profit
3,794
1,689
972
6,455
Services
`000
Other
`000
Total
000`
627
110
3,195
39,962
203
6,768
Administrative expenses
Selling and distribution
expenses
Unallocated
operating income/expenses
Interest income
Interest expenses
Profit before taxation
Taxation
Profit after taxation
Segment assets
Unallocated corporate assets
Unallocated deferred tax
(966)
(599)
(148)
,
(1 713)
(26)
(1,256)
(673)
(18)
(1,947)
(31)
(1,739)
(1,978)
(503)
41
(244)
1,572
417
806
2,795
53
203
2,345
1,572
417
806
2,795
9,994
5,063
1,558
16,615
53
243
243
54
(
)337
203
2,008
847
17,705
2,379
90
847
20,174
379
2,088
3, 359
837
Total assets
9,994
5,063
1,558
16,615
Segment Liabilities
Unallocated corporate liabilities
Unallocated deferred tax
904
589
162
1,655
Total liabilities
904
589
162
1,655
54
379
6,860
Other segment information:
Depreciation
Unallocated Depreciation
Capital expenditure
Unallocated Capital expenditure
525
2,593
241
686
89
855
240
3,519
13
45
868
24
3,568
29
4
28
The segment results for the year ended 31 December 2004 are as follows:
Sales to external customer
10,064
9,512
5,453
25,029
188
1,898
27,115
Cheese
000`
Butter
`
000
Milk
powders
`000
Total
Dairy
000`
Services
`000
Other
`000
Total
000`
Gross profit
2,357
1,175
820
4,352
Other operating income/expenses
Unallocated
operating income/expenses
Interest expenses
Profit before taxation
Taxation
Profit after taxation
Segment assets
Unallocated corporate assets
Unallocated deferred tax
Total assets
Segment Liabilities
Unallocated corporate liabilities and
shareholders' equity
Unallocated deferred tax
(453)
(492)
(301)
(1,246)
1,904
683
519
3,106
1,904
683
4,604
2,529
4,604
2,529
1,423
380
519
989
989
243
12
(1)
11
11
53
4,417
(51)
(1,298)
2
2
(1,050)
(312)
1,757
(301)
1,456
9,317
662
35
3,106
8,122
(50)
1,145
8,122
2,046
50
22
1,145
10,014
177
2,245
1,915
703
Total liabilities
1,423
380
243
2,046
22
177
4,863
Other segment information:
Depreciation
d
Unallocated epreciation
Capital expenditure
Unallocated Capital expenditure
Secondary reporting format
geographical segments:
286
1,198
159
301
46
82
491
1,581
4
2
25
36
520
1,619
19
Sales by country
Ukraine
Germany
Russia
Denmark
Holland
Bulgaria
Azerbaijan
Poland
Other countries
Year ended 31
December 2005
`000
33,689
2,179
1,376
669
479
431
293
184
662
39,962
Year ended 31
December 2004
`000
22,669
680
1,921
205
228
1,412
27,115
The majority of the Group's recognised assets and liabilities are in Ukraine. Sales to the countries in Europe represent sales to
international traders of milk powders located in Europe. These traders consequently resell the milk powders to other countries
worldwide.
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
6. Property, plant and equipment
Cost or valuation
Assets under
Construction
`000
Land and
Building
`000
Plant and
Machinery
`000
Vehicles and
equipment
`000
Total
`000
Opening balance
Acquisition
Additions / transfers from AUC
Disposals
Exchange differences on translation to the presentation currency
992
3
3,257
3,401
)
162
(
3,941
138
1,219
(8)
798
Closing balance
1,013
6,088
Accumulated depreciation
Opening balance
Acquisition
Depreciation charge
Disposals
Exchange differences on translation to the presentation currency
Closing balance
Net book amount at 31 December 2005
Cost or valuation
Opening balance
Revaluation
Additions / transfers from AUC
Disposals
Exchange differences on translation of the presentation currency
Closing balance
Accumulated depreciation
1,013
40
289
3,110
(2,393)
(54)
992
Opening balance
Revaluation
Depreciation charge
Disposals
Exchange differences on translation to the presentation currency
Closing balance
Net book amount at 31 December 2004
992
1,447
63
113
6
271
1,900
4,188
412
4,130
155
(450)
(306)
3,941
136
1,471
132
(115)
(
)177
1,447
2,494
1,365
240
1,210
(53)
364
3,126
552
96
219
(21)
127
973
2,153
439
573
488
(45)
(90)
1,138
204
1,312
(148)
319
7,436
585
6,998
(3,610)
1,643
2,825
13,052
414
111
537
(44)
127
1,145
1,680
347
187
881
(427)
150
2,413
270
869
(59)
525
4,018
9,034
1,238
5,179
4,634
(3,315)
(300)
1,365
1,138
7,436
50
474
90
(23)
(
)39
552
813
36
146
298
(4 )1
(
)25
414
724
222
2,091
520
179
)
(
(
)241
2,413
5,023
Fixed assets with a net book value of 4,453,000 as at 31 December 2005 ( 2,339,000 at 31 December 2004) were pledged as
collateral for loans.
The assets of the Group were revalued in January 2004 according to the revaluation policy. The valuation included a combination
of different methods used by independent appraisers. It was carried out by Podilia(cid:1)Expert LLC (Ukraine), who valued the assets
"
using the cost and comparables method, and by BGS(cid:1)Aktiv LLC (Ukraine), who used the asset cash generating method The
company expects to conduct the valuation of the assets of the Group in January(cid:1)February 2007.
.
"
"
"
30
7. Intangible assets
Cost
At 1 January 2005
Acquisition
Additions
Disposals
Exchange differences on translation to the presentation currency
At 31 December 2005
Accumulated amortisation
At 1 January 2005
Acquisition
Amortisation charge for the year
Disposals
Exchange differences on translation to the presentation currency
At 31 December 2005
Net book amount at 31 December 2005
Cost
At 1 January 2004
Acquisition
Additions
Disposals
Exchange differences on translation to the presentation currency
At 31 December 2004
Accumulated amortisation
At 1 January 2004
Acquisition
Amortisation charge for the year
Disposals
Exchange differences on translation to the presentation currency
At 31 December 2004
Net book amount at 31 December 2004
Computer
software
`000
Trade
Marks
`000
Goodwill
`000
Total
`000
7
1,463
(1)
110
1579
5
23
(2)
2
28
1,069
79
1,148
383
28
411
18
1
19
392
1,148
1,551
7
11
(1)
3
20
5
5
(2)
1
9
11
7
7
4
4
3
As of 31 December 2005 the Group had acquired the brand names "Nash Molochnik" (in English "Our Dairyman"), "Narodny
product" ("People's Product") and "Vershkova Dolyna" ("Creamy Valley") from Alfa(cid:1)Broker Ltd.
7
7
7
4
3
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
8. Investments
Details of investments, including the percentage of the share capital owned by the Operating Group, are as follows:
Balakonenko (50%)
Other listed and non(cid:1)listed investments (less than 5% holding)
As at
31 December
2005
`
000
As at
31 December
2004
`
000
97
97
83
83
Due to the lack of a developed market all investments have been valued at cost. The Operating Group's management believes
that the carrying value of investments is not significantly different from fair value.
Ukrproduct Group plc was registered in
Exclusion from the Group.
in 2004 with the intention of becoming the ultimate
holding company for the Group upon reorganisation and a public entity via IPO on the London Stock Exchange. Later in 2004,
the management decided that the purpose of the ultimate holding company will be best served by a company based in Jersey, to
which effect Ukrproduct Group Ltd, Jersey was created. Thus Ukrproduct Group plc lost its sole business purpose, was excluded
from the Group and
liquidated in
December
solvently
the UK
2005.
9. Deferred tax
Deferred tax asset at the beginning of the period
Deferred tax liability at the beginning of the period
3
Deferred tax recogni ed in income statement during the year (Note 2 )
Deferred income tax arising on the revaluation of property, plant and equipment
Exchange differences on translation to the presentation currency
s
Deferred tax asset at the end of the period
Deferred tax liability at the end of the period
Year ended
31 December
2005
`
000
Year ended
31 December
2004
`
000
36
(703)
35
(115)
90
(83 )7
25
(690)
(2)
36
(703)
32
10. Acquisition of subsidiaries
On 1 November 2005, Ukrproduct Group CJSC acquired 62.2 % of the share capital of Letichevsky Maslozavod OJSC and 100 %
of the share capital of Jmerinsky Maslosyrzavod LLC (both are dairy products production plants). Th
acquisitions gave rise to
Goodwill of
1,148,000
ese
.
If the acquisition had occurred at the beginning of the period (1 January 2005), Group revenue would have been 43,527,000 and
profit before tax would have been 2,463,000.
Letichevsky Maslozavod OJSC
`000
Jmerinsky Maslosyrzavod LLC
`000
122
1
16
519
536
658
484
174
(6 )2
112
234
17
151
374
542
776
736
40
40
Non(cid:1)Current Assets
Property, Plant and equipment
Current assets
Cash and cash at bank
Inventories
Receivables and prepayments
Total current assets
Total assets
Trade and other payable
Net assets
Minority interest (37.8%)
Net assets acquired
Acquisition price
Goodwill
Purchase consideration settled in cash
Cash and cash equivalents in subsidiary acquired
Cash outflow on acquisition
Total
`000
356
18
167
893
1,078
1,434
1,220
214
(68)
152
1,300
1,148
1,300
(18)
1,282
These companies have been consolidated into the Group. The management
12 months after the acquisition date in order to reflect their fair value in the financial statements of the next reporting period.
planning to appraise the assets acquired within
are
11. Inventories
Raw materials
Finished goods
Other inventories
As at
31 December
2005
`
000
2,714
1,140
669
4,523
As at
31 December
2004
`
000
817
1,441
70
2,328
As at 31 December 2005 inventories with a value of 2,439,000 were pledged as collateral for the loan of 3,042,000 received
from Raiffeisen Bank Ukraine (no inventories were pledged as collateral as at 31 December 2004).
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
12. Trade and other receivables
Trade debtors
Other debtors
Prepayments
As at
31 December
2005
`
000
3,282
449
337
4,068
As at
31 December
2004
`
000
1,505
297
221
2,023
There is no concentration of credit risk with respect to trade receivables as the Operating Group has large number of customers,
primarily in Ukraine.
13. Other Debtors
VAT receivable
Prepaid profit tax
Loans issued (to related parties)
Loans issued (to other parties)
As at
31 December
2005
`
000
As at
31 December
2004
`
000
315
6
37
358
5
1
201
11
218
Loans issued are denominated in Hryvna, are short term in nature, and are interest free. Loans include 24,000 issued to
contracted transporters of goods for purchase of vehicles and 13,000 issued to Group employees (2004: 11,000 to Group
employees).
4
1 . Cash and cash equivalents
Cash (cid:1) in UAH
Bank (cid:1) in UAH
Bank (cid:1) in foreign currency
As at
31 December
2005
`000
As at
31 December
2004
000`
6
409
38
453
2
209
89
300
34
15. Share capital
Authorised
As at 31
December
2005
'
000
As at 31
December
2005
'000
As at 31
December
2004
'000
As at 31
December
2004
'000
Ordinary shares of 10p each
50,000
5,000
30,000
3,000
Ordinary shares of 10p each
At beginning of the year
Other issues during the year
At end of the year
Issue of shares
Issued and fully paid
2005
'
000
30,000
11,215
41,215
2005
'000
3,000
1,121
4,121
2004
'000
2004
'000
30,000
30,000
3,000
3,000
On 11 February 2005 the common shares of the Company were admitted to the Alternative Investment Market of the London
Stock Exchange. The details of the share offering by the Company are provided below:
Number of shares placed with public
Nominal value of a share, (GBP)
Proceeds from issue of shares, '000 including
Increase in share capital, '000
Share premium, '000
11,214,953
0.1
5,519
1,121
4,398
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
16. Other reserves
Balance at 1 January 2004
Gain on revaluation of fixed assets
Deferred income tax on gain on revaluation
Merger reserve arising an acquisition of Operating Group
Net profit for the period
Depreciation on revaluation of fixed assets
Elimination of share issued and merger reserve on acquisition of
Operating Group
Exchange differences on translation to the presentation currency
Share
premium
`000
Revaluation
reserve
`000
Notes
3,073
(674)
(154)
(244)
Share
option
reserve
`000
Merger
reserve
`000
(1,414)
(15,288)
15,288
Balance at 31 December 2004
2,021
(1,414)
Issue of shares
Fund(cid:1)raising expenses
Share based payment
Exclusion from Group
Depreciation on revaluation of fixed assets
Reduction of revaluation reserve
Decrease of minority Interest
Exchange differences on translation to the presentation currency
15
4,398
(361)
(120)
196
(108)
(25)
28
336
(12)
253
Total
equity
`000
(1,414)
3,073
(674)
(15,288)
(154)
15,288
(244)
607
4,398
(361)
76
(12)
(108)
(25)
28
589
Balance at 31 December 2005
3,917
2,252
(1,173)
196
5,192
The reduction in revaluation reserve is due to sale of property, plant and equipment which have previously been revalued. The
following describes the nature and purpose of each reserve within owners' equity
Reserve
Share capital
Description and purpose
Amount subscribed for share capital at nominal value.
Share premium
Amount subscribed for share capital in excess of nominal value.
Revaluation
Merger
Gains arising on the revaluation of the Group's property (other than investment property). The balance
on this reserve is wholly undistributable.
Losses arising on the application of the pooling of interests method of consolidation used to account
for the merger of Ukrproduct Group Ltd and its subsidiaries.
Share option
Amount arising from share based payments (issue of share options).
Retained earnings
Cumulative net gains and losses recognised in the consolidated income statement.
Minority interest
Portion of the profit or loss and net assets of the subsidiary attributable to equity interests that are not
owned, directly or indirectly through the subsidiaries, by the parent.
Fund(cid:1)raising expenses
The Group has entered into equity(cid:1)settled share(cid:1)based transactions with parties other than employees
and has measured the transactions indirectly at the fair value of the instruments granted. This party
was WH Ireland who acted as broker of the fund(cid:1)raising for the Group by placing ordinary shares on
the London Stock Exchange, section AIM in February 2005. The fair value of the share(cid:1)based
instruments (warrants) given to the broker as part of consideration was 120,000.
Reduction of the
revaluation reserve
Reduction of the revaluation reserve relates to sale of those assets that were previously revalued.
36
17. Long term loans
Long term loans are repayable i
December 2004)
18%) discount rate.
n 2008 and consist of 152,408 interest free loan as at 31 December 2005 ( 220,642 as at 31
. The fair value of the interest free loan has been calculated by discounting the cash flows using a 12% (2004:
18. Other long term liabilities
Bonds
Promissory notes
Less:
Current portion of long(cid:1)term liabilities
As at
31 December
2005
`
000
61
6
(67)
As at
31 December
200
4
000`
933
5
938
In 2003, Agrospetsresursy LLC issued bonds denominated in Hryvna. The bonds bear an interest of 12 % (2004: 18 %) and
mature on 8 November 2006. The carrying amounts approximate to fair value.
Promissory notes are denominated in Hryvna and are interest free. Maturity term for promissory notes is due in November 2006.
19. Bank loans and overdrafts
Bank loans include a secured 3(cid:1)year credit line of up to UAH 40,000,000 from Raiffeisen Bank Ukraine denominated in
Ukrainian Hryvna (UAH). As at 31 December 2005 an amount of
interest rate as at December 31, 2005 was 15.5% (2004: 18%). Any excess of UAH 8,000,000 must be repaid on 2 June 2006,
with an option to resume the full credit line on the next day. This loan is secured by the assets of OJSC Molochnik.
3, 042,000 was drawn from this credit line.
The average
"
"
20. Trade and other payables
Trade creditors
Other creditors
Prepayments
Accruals
VAT and other taxation payable
21. Expenses by nature
Depreciation (Notes 6 and 7)
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefit costs
Other expenses
Total cost of goods sold, marketing and distribution costs and
administrative expenses
As at
31 December
2005
`
000
1,966
305
27
249
59
2,606
Year ended
31 December
2005
`000
892
301
28,762
3,255
4,798
38,008
As at
31 December
200
4
000`
1,427
46
82
105
11
1,617
Year ended
31 December
2004
000
524
(873)
21,298
1,373
2,787
25,109
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
22. Employee benefit expense
Wages and salaries
Social security costs
Remuneration of key personnel
Directors (cid:1) Salaries
Directors (cid:1) Options
Directors (cid:1) Bonuses
Year ended
31 December
2005
`
000
2,426
829
3,255
Year ended
31 December
2005
`
000
257
76
30
363
Year ended
31 December
2004
000`
995
378
1,373
Year ended
31 December
2004
`000
20
20
The Directors are those persons remunerated by the Group who are members of the Board of Directors of the Company
(Ukrproduct Group Ltd).
38
23. Income tax expenses
Income tax comprised the following:
Current tax charge(cid:1) Ukraine
Current tax charge(cid:1) non(cid:1)Ukraine
Deferred tax relating to the origination and reversal of
temporary differences (Note 9)
Income tax charge for the year
Year ended
31 December
2005
`
000
348
24
(35)
337
Year ended
31 December
2004
000`
250
76
(25)
301
Differences in treatment of certain elements of financial statements by IFRS and Ukrainian statutory taxation regulations give rise
to temporary differences. The tax effect of the movement on these temporary differences is recognised at the rate of 25% (2004:
25%).
Profit before tax Ukraine
Profit before tax (cid:1) non(cid:1)Ukraine
(cid:1)
Tax calculated at domestic tax rates applicable to profits in the
relevant countries
Net income not subject to tax and expenses not deductible for
tax purposes at weighted average tax rate
Tax charge
Year ended
31 December
2005
`
000
895
1,450
275
62
337
Year ended
31 December
2004
`000
520
1,237
213
88
301
The weighted average applicable tax rate was 11.7% (2004: 12.1%). The charge is due to the changes in profitability of the
companies comprising the Group in the respective countries.
Ukraine currently has a system of taxation broadly similar in scope to those of the developed market economies. There are a
number of laws related to various taxes imposed by both central and regional governmental authorities. Although laws related to
these taxes have not been in force for significant periods, the practice of taxation and implementation of regulations are well
established, documented with a sufficient degree of clarity and adhered to by the taxpayers. Nevertheless, there remain certain
risks in relation to the Ukrainian tax system: few court precedents with regard to tax related issues exist; different opinions
regarding legal interpretation may arise both among and within government ministries and regulatory agencies; tax compliance
practice is subject to review and investigation by a number of authorities with overlapping responsibilities.
Generally, tax declarations remain subject to inspection for an indefinite period. In practice, however, the risk of retroactive tax
assessments and penalty charges decreases significantly after three years. The fact that a year has been reviewed does not
preclude the Ukrainian tax service performing a subsequent inspection of that year.
The Group's management believe that it has adequately provided for tax liabilities in the accompanying financial statements;
however, the risk remains that those relevant authorities could take different positions with regard to interpretive issues.
During the period under review, the Ukrainian companies within the Group paid royalties and interest charge on the outstanding
credits and bonds to another Group company Linkstar Limited (Cyprus). These payments were not taxable in Ukraine due to the
existing Double(cid:1)Taxation Treaty between Ukraine and Cyprus.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
24. Earnings per share
Basic earnings per share has been calculated by dividing net profit attributable to the ordinary shareholders (profit for the year)
by the weighted average number of shares in issue. The diluted earnings per share take into account the potential exercise of all
options and warrants in existence at the date of this report. The options were granted to the Directors of the Company on 31
January, 2005 and are exercisable until 11 February 2009 at the price of 0.535. The warrants were granted to the Company's
Brokers on 31 January 2005 and are exercisable until 31 January 2008 at the price of 0.535
Net profit attributable to ordinary shareholders,
00`0
Weighted number of ordinary shares in issue
Basic earnings per share, pence
Weighted number WH Ireland warrants
Weighted number Directors option shares
Diluted average number of shares
Diluted earnings per share, pence
Year ended
31 December
2005
2,003
39,924,465
5.0
1,152,974
807,082
41,884,521
4.8
Year ended
31 December
2004
1,436
30,000,000
4.8
4.8
25. Share(cid:1)based payment
The Company operates an equity(cid:1)settled share based remuneration scheme for employees. During the period under review the
Company has granted share options to the Directors. All options granted to the Directors expire on February 11, 2009.
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year
2005
Weighted
Average
Exercise
Price
2005
Number
200
4
Weighted
Average
Exercise
Price
2004
Number
0.535
0.535
998,888
86,860
Outstanding at the end of the year
0.535
912,028
The fair value of options granted during the year has been calculated based on the following data.
Option pricing model used
Weighted average share price at the grant date
Exercise price
Weighted(cid:1)average contractual life, years
Expected volatility
Expected dividend yield
Expected dividend growth rate
Weighted(cid:1)average risk(cid:1)free interest rate
2005
2004
Adjusted Black(cid:1)Scholes
0.545
0.535
3.947
30%
5%
0%
4.44%
To account for dividend yield in the Black(cid:1)Scholes model, the modified current stock prices were calculated at option grant dates
by subtracting present value of future dividend payments from the actual stock price at those dates.
Dividends were assumed to be paid in two half(cid:1)yearly instalments.
Expected volatility was approximated by an average historical volatility of the peer group companies. The latter was calculated
from daily standard deviations of the peer group stock returns during
last 4 years.
the
Fair value of the options granted and outstanding at the end of the year was estimated to be 95,336.
An Income Statement remuneration charge of 76,000 was recognised in 2005.
40
26. Dividends
As at 25 April 2006, the Board of Directors proposed
ended 31 December 2005 in the amount of 200,000 which would lead to 0.85 pence per ordinary share for the full year in the
amount of 50,000. If approved at the AGM, the final divid
as at 2 June 2006. No tax consequences for the Group will arise out of this transaction as the Group's parent company is an
entity registered under Jersey law.
the final dividend payment of 0.5 pence per ordinary share for the year
end will be paid on 30 June 2006 to the shareholders on the register
3
27. Minority interest
Balance at 1/01/2005
Acquisitions
Net profit for the period
Gain on revaluation
Depreciation on revaluation of fixed assets
Decrease of minority nterest
i
Deferred income tax on revaluation
Exchange differences on translation to the presentation currency
Balance at 31/12/2005
Year ended
31 December
2005
`
000
Year ended
31 December
2004
`000
132
65
5
(43)
30
186
68
20
75
(4)
(1 )6
(11)
132
As at 31 December 2005 a minority interest of 2.57% (2004: 4.8%) was held in Molochnik OJSC, and 38% was held in
Letichevsky Maslozavod OJSC.
28. Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the
other party in making financial or operational decisions as defined by IAS 24 "Related Party Disclosures". In considering each
possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Transactions and balances between the Group companies and related parties are set out below.
Sales of goods and services to related parties and purchases from related parties are summarised below All sales and purchases
were with related parties under common control of the ultimate beneficiaries of the Company.
.
Sales
Purchases
Notes
Balances due from/(to) related parties at each period end are shown below.
Receivables and prepayments
Loans issued
Trade and other payable
Promissory notes
Notes
12
13
20
18
Trade and other payable include payables to the shareholders of the Company.
Year ended
31 December
2005
`
000
160
146
Year ended
31 December
2005
`
000
305
(419)
(6)
Year ended
31 December
2004
000`
278
374
Year ended
31 December
2004
`
000
299
201
(103)
(5)
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
29. Currency analysis
Currency analysis for the period ended 31 December 2005 is set out below:
Non(cid:1)Current Assets
Property, Plant and equipment
Intangible assets
Investments
Deferred tax
Goodwill
Current assets
Inventories
Loans issued
Receivables and prepayments
Tax debts
Cash and cash at bank
Total assets
Non(cid:1)Current Assets
Long(cid:1)term credits
Deferred tax
Current Liabilities
Bank loans and overdrafts
Trade and other payable
Current portion of long term liabilities
Current income tax liabilities
Total liabilities
UAH
USD
RUR
GBP
UR
Total
9,022
11
97
90
4,523
37
4,056
321
415
12
392
9
25
18,572
438
152
837
3,042
2,161
67
155
6,414
1
1
1,148
1
13
1,162
2
2
368
77
9,034
403
97
90
1,148
4,523
37
4,068
321
453
20,174
152
837
3,042
2,606
67
156
368
77
6,860
42
Currency analysis for the period ended 31 December 2004 is set out below:
UAH
USD
RUR
Other
Total
Non(cid:1)Current Assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax
Current assets
Inventories
Receivables and prepayments
Loans issued
Tax debts
Cash and cash at bank
Total assets
Liabilities
Non(cid:1)Current Assets
Long(cid:1)term loans
Bonds
Promissory notes
Deferred tax
Current Liabilities
Bank loans and overdrafts
Trade and other payables
Promissory notes
Current income tax liabilities
Total liabilities
5,012
3
83
36
2,328
1,886
11
6
211
9,576
211
933
5
703
845
1,430
150
4,287
11
136
201
62
410
54
96
150
5,023
3
83
36
2,328
2,022
212
6
300
10,014
221
933
5
703
1,077
1,671
253
4,863
27
27
232
146
7
385
41
41
43
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting ("AGM") of Ukrproduct Group Ltd will be held on Thursday 22 June 2006
at 10.00 am at the offices of CJSC Ukrproduct Group, 14th Floor, 39 41 Shota Rustaveli Street, 01033 Kyiv, Ukraine for the
purposes of considering and, if thought fit, passing the following ordinary resolutions.
(cid:1)
1. To receive and approve the Directors' Report and
December 2005.
Consolidated
Financial Statements
of the Group
for the
year
ended 31
2.
To receive and approve the Financial Statements
of the Company
for the
year
ended 31 December 2005.
3
. To receive and approve the Remuneration Committee Report.
. To approve the payment of a dividend for the year ended 31 December 2005 of 0.85 pence per ordinary share, including a final
4
dividend of 0.5 pence per share to be paid on 30 June 2006 to shareholders whose names appear on the register of members at
the close of business on 2 June 2006.
. To reappoint BDO Stoy Hayward LLP as auditors to the Company to hold office for the financial year 2006 until the conclusion
5
of the next annual general meeting and to authorise the Directors to determine their remuneration.
Approved by and signed by order of the Board
Authorised Signatory
Bedell Secretaries Limited
Secretary
26 New Street
St. Helier
Jersey JE2 3RA
Channel Islands
25 April 2006
NOTICES
1. Any member entitled to attend and vote at the AGM is entitled to appoint one or more proxies (who need not be a member of
the Company) to attend and, on a poll, vote instead of the member. Completion and return of a form of proxy will not preclude a
member from attending and voting at the meeting in person, should he subsequently decide to do so.
2. In order to be valid, any form of proxy, power of attorney or other authority under which it is signed, or a notarially certified or
office copy of such power or authority, must reach the Company's Registrars, Capita Registrars, Proxy Department, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not less than 48 hours before the time of the meeting or of any
adjournment of the meeting.
3. As permitted by Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders must be entered on the
Company's share register at 6.00 pm on Tuesday 20 June 2006 in order to be entitled to attend and vote at the AGM. Such
shareholders may only cast votes in respect of shares held at such time. Changes to entries on the relevant register after that
time shall be disregarded in determining the rights of any person to attend or vote at the meeting.
4. Copies of the service contracts of each of the Directors, and the register of Directors' interests in shares of the Company kept
pursuant to section 325 of the Act will be available for inspection at the registered office of the Company during usual business
hours on any weekday (Saturdays and public holidays excluded) from the date of this notice until the date of the AGM and at the
place of the AGM from at least 15 minutes prior to and until the conclusion of the AGM.
44
SHAREHOLDER INFORMATION
Financial Calendar
31 December 2005
25 April 2006
22 June 2006
30 June 2006
19 September 2006
31 December 2006
Financial year end
Announcement of preliminary results
Annual General Meeting
Final Dividend Payment
Announcement of interim results
Financial year end
Website
The Group operates two corporate websites. The website www.ukrproduct.com contains the corporate information and news; the
website www.logistics.ukrproduct.com provides the background information and contact details of the Group's distribution and
logistics subsidiary. All Group websites are regularly updated.
Administrative enquiries
All enquiries relating to individual shareholder matters should be made to the registrar at: Capita Registrars Shareholders
Services Department, The Registry, 34 Beckenham Road, Beckenham,Kent, BR3 4TU
The registrar will assist with enquiries regarding any change of circumstances (e.g. name, address, bank account details,
bereavement, lost certificates, dividend payment and transfer of shares). All correspondence should be clearly marked
Ukrproduct Group Ltd and quote the full name and address of the registered holder of the shares.
"
"
Shareholder information, together with a range of online services for Ukrproduct Group Ltd shareholders is also available
registrar's website www.capitaregistrars.com.
on
the
Share Price
The current share price of Ukrproduct Group Ltd ordinary shares of 10p nominal value can be accessed via the link to DigitalLook
on www.digitallook.com/ir/aim:UKR. Alternatively, it may be obtained through the website of the London Stock Exchange
www.londonstockexchange.com.
Payment of dividends
As detailed in the Chairman's report it is Ukrproduct Group Ltd's intention to pay a final dividend to all shareholders on the
for dividends to be paid directly into bank or
record at 2 June 2006. It is more efficient for shareholders and
building society accounts. Any shareholder who wishes to receive future dividends in this way should contact Capita Registrars
directly or utilise the online services on the registrar's website.
the Company
Investor Relations
For further copies of the annual financial statements or other investor relations enquiries, please contact:
Bedell Secretaries Limited
PO Box 75, 26 New Street, St Helier, Jersey JE2 3RA, Channel Islands
tel: +44 1534 814 876
fax: +44 1534 814 815
e(cid:1)mail: jean.walsh@bedelltrust.com,
dmitry.dragun@ukrproduct.com
Company registration
Registered Office: 26 New Street, St Helier, Jersey JE2 3RA, Channel Islands
Registered in Jersey with number 88352.
Analysis of Shareholders
Size of Shareholding
Number of holders
% of total
Total holding
% of total
Up to 5,000 shares
5,001 to 50,000 shares
50,001 to 200,000 shares
Over 200,000 shares
Total
72
49
7
13
141
51.06%
34.75%
4.97%
9.22%
100.0%
175,798
764,706
836,061
39,438,388
41,214,953
0.43%
1.85%
2.03%
95.69%
100.0%
The ultimate controlling parties of Ukrproduct Group Ltd are Messrs Sergey Evlanchik and Alexander Slipchuk who collectively
controlled, as of 25 April 2006, % of the common shares of the company.
69
45